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Talks with banks delay release of Orr's plan for Detroit bankruptcy

Court-ordered negotiations with two major banks have pushed back the release of a plan to get Detroit through the largest municipal bankruptcy in U.S. history, a spokesman for the city's emergency manager said Thursday.

State-appointed Emergency Manager Kevyn Orr had said his plan of adjustment would be filed in early January in bankruptcy court, but a resolution with UBS AG and Bank of America Corp. on a pension debt swaps deal — along with ongoing mediation with other creditors — has delayed it, Orr spokesman Bill Nowling said.

The city and the two banks had agreed to a $220 million payoff, but bankruptcy court Judge Steven Rhodes told them to find a better deal. A new $165 million deal to terminate the swaps agreement was reached late last month. Rhodes still has to approve the deal.

Detroit pledged casino tax revenue in 2009 as collateral to avoid defaulting on pension debt payments. The swaps allowed Detroit to get fixed interest rates on pension bonds with the two banks.

Orr testified last week in federal court that the proposal to terminate the deal for $165 million is best for Detroit. He said it removes significant financial risks and allows the bankruptcy restructuring to proceed.

Meanwhile, Orr and his team continue to hold court-ordered mediation with other creditors. Any agreements reached would be part of the plan of adjustment.

The deadline ordered by the court for the plan of adjustment isn't until March, but Nowling said Orr's new release date would depend on the progress of the city's talks with the other creditors, which includes unions, retirees and the city's pension funds. Mediation sessions took place this week in New York.

"If we look like we're close, we are going to want to delay the plan so we can bake in any agreement that we make through mediation," Nowling told The Associated Press on Thursday in an interview. "It's pretty fluid right now."

Rhodes also has to approve the plan of adjustment when it's filed.

Orr was hired in March by Gov. Rick Snyder to fix Detroit's finances. He has not publicly said what exactly will be in the plan of adjustment, but wants to get it all done by the time his contract expires at the end of September.